Can you sell a house if you owe taxes? Life already has enough worries for you to deal with. But, when you decide to sell your home, unpaid taxes are a primary concern. And it can be harsh. The IRS will send you notices, your debt grows larger, and your household takes the blow.
This is a huge problem you may not have expected when you were starting out – but it happened. Now, you are facing possible property loss. How much worse can it get? You are watching your investments, savings, and years of hard work go out the window.
Unpaid taxes are one of the reasons couples opt to sell their house, but the money owed cannot be ignored. There may be some other ways to resolve the taxing (pun intended) tax matters, but first things first: understand what taxes are, the risk-free approach to recovering from tax delinquency, and getting help where needed.
Tax Delinquency vs Tax Lien
You may have imagined raising a family in the house that you and your spouse have been saving for. However, things sometimes get out of hand and financial issues arise. You come to a point when you have to give up your house for sale due to unpaid taxes.
Tax delinquency and a tax lien are pretty much the same thing, just different aspects of the situation. Tax delinquency describes any individuals who are late or behind on their taxes–no matter how much they owe. A tax lien is the actual term for holding your property as collateral damage. Let’s take a closer look into what a tax lien means.
What is a tax lien?
A tax lien comes into play when talking about property sale. A lien is a right to keep possession of property belonging to a person until he settles the full payment. Your mortgage is technically a lien. However, an IRS lien, if you have one, as well as property taxes trumps your mortgage. This means that if you fail to pay your taxes, the government can seize your property.
You certainly do not want to take this side of property ownership for granted. It would be very useful to think about the worse from the beginning. Some people save up through their 401(k) to reduce tax bills. Others look for funding programs to save on tax bills.
You can escape the threat of losing your house to the IRS if you are prepared. Otherwise, you can sell your home to make the debts go away.
Can you sell a house if you owe taxes? The burden of tax delinquency
Putting up your home in the market is a difficult action especially if the cause is tax delinquency. Tax delinquency is simply the failure to pay your tax in full by the due date. There are different types of taxes that people have to pay when filing their return. Among these are personal income taxes, excise taxes, consumption taxes, estate taxes, and property taxes, among a host of other taxes.
Let’s talk about property taxes
You have felt it, too. Out of the things involved in buying a house, property taxes are the oldest form and most annoying. As if spending so much money on the property is not enough, including necessary renovations, you still have to worry about tax payment dates. On top of that, you have the whole year to think about it along with your monthly mortgage.
Wary homeowners who avoid the risk of foreclosure plan their property tax payment carefully. There are basically three ways to pay property taxes:
- The bank allots a certain amount from the monthly mortgage for the property tax
- Homeowners pay off the full amount on due date, which is normally middle of the year (June 30th)
- Homeowners pay the property tax monthly in smaller amounts under the TIPP (Tax Installment Payment Plan) program
While the government provides flexible options for homeowners to avoid tax delinquency, you may still find yourself caught in financial struggle. This can eventually cause you to fall behind on your tax payments.
It takes time to recuperate from this. But sometimes, recovery includes selling off your house. Still, the question arises and you ask yourself: “Can I sell my house if I owe back taxes?”
What Are Your Options If You Need to Sell a House You Owe Taxes On
Hope is not lost. There are ways to settle your tax payments or even keep your home. Take a look at the following options.
Borrow money and stay in your home
If you can borrow money from your family or friends to pay those taxes, do so by all means. No matter how dire the situation is, there may be a way to raise money for your home. Most money-making methods would take away some time from your family. You will have to tighten your belt even more to save more—but these are temporary. Once the taxes are paid, you and your family get to remain in your home and continue planning for the future.
Installment agreement with IRS
If you can’t pay the tax amount in full, pay it by installment. The IRS does have this installment agreement plan, which you can avail if you think you can’t pay in full within 120 days. You can apply online, by mail, or phone.
List your home on the MLS
If push comes to shove, consider listing it to MLS (Multiple Listing Service) with the help of a real estate agent. It is also possible to sell independently through MLS although it comes with the inconvenience of shouldering all the paperwork as well as the legwork. This will guarantee payment for all the money owed at closing and may solve your problem.
This is not the best idea, but it might work. Why the doubt?
Not every buyer would be willing to pay the selling price of your home if you will sell it as-is. Add to it the risk of incurring additional tax debts while you wait for your home to sell, which may take quite a while.
Sell your home as-is to real a real estate company
When the only option left is to sell, you might as well sell it to a reputable realtor, such as Simple House Solutions.
Do not let your financial strain cloud your judgment when it comes to selling your house to a real estate investor. Finding a reputable company is key! Although there are many people who are looking to take advantage of you–Simple House Solutions is focused on providing you solutions and options. It is important to choose the company you do business with carefully.
There are two good reasons to do this:
- Quick sale. You do not have to wait months for your home to sell. Long wait sometimes land you cheaper offers as if all the memories you had with your home are taken for granted.
- No renovations. There is no need to worry about repairs or remodeling as the company will take care of the for you.
If You Want to Sell Your House but Worry About Tax Delinquency, Simple House Solutions Has Your Back
You would probably agree tax talks are complex. You can load yourself with information from various sources including the Internet and still wonder: can I sell my house if I owe back taxes? Would this be the solution? Is it beneficial for my family?
Rather than waste your time trying to pick this apart on your own, get help from real professionals that can help you better understand the details and give you the right answers.
Simple House Solutions always has its clients’ best interest. Our dedicated real estate specialists will offer you 100% support from beginning to end.
Call us today and let us discuss the perfect option for you.